The True Value of False Claims Act Fines
The False Claims Act used to carry a civil fine of $2,000. When you ask?
Well this is way back in 1863 under the first version of the law. (It also included possible imprisonment!)
It is pretty difficult to translate 1863 dollars to today’s value, however, there are websites that purport to do this. One table I consulted showed that the money could be worth anywhere from $31,200 to $4,666,000 depending upon how one considered measuring it. Yes, that is a pretty big range.
Another strictly inflation based model (don’t know what they were using to figure a rate of inflation back in 1863) put the amount at approximately $36,500.
Regardless, I think it is fair to say that when Congress enacted the original False Claims Act they meant the $2,000 fine to be a considerable and serious sum of money for a violation of the Act. I think it was meant to send a message that defrauding the government was a bad thing to do.
The reason for bringing this up is that the civil fines, which are in the modern version of the statute as ranging from $5,000-$10,000 are also subject to adjustment every now and then pursuant to the Federal Civil Penalties Inflation Adjustment Act. Generally they are now set from $5,500-$11,000.
For whatever reason the Rail Road Retirement Board appears to be taking the lead to analyze what the fines should be under this law and they have come up with a pretty complex formula, which yields a new range of $10,781.40 to $21,562.80 in what is currently called an interim final rule. This new fine would be effective August of 2016 not retroactively according to the rule.
The Defense bar consistently is looking to label the award of fines under the False Claims Act as some kind of huge unfairness, invoking the 8th Amendment to the U.S. Constitution prohibiting cruel and unusual punishment (and excessive fines) with more success than I’d like to see, but not that much success. The death penalty is not cruel and unusual, but paying a civil fine on a per violation basis is?
I admit keeping track of this is going to be interesting if they constantly update the amount of the fines. I could see a situation in which a civil fine could be different for claims in the same case, if it involved a multi-year fraudulent scheme.
In practice right now, not that many cases are decided on the basis of civil fines. Settlements generally focus on the damages involved in a case. I’ve seen opinions that fines should be limited to some multiple of the damages as well. I’m sure there is sophisticated legal reason why a fine is not viewed favorably under those circumstances.
However, my own view is a little different. There are many kinds of cases, which may not involve large monetary damages but the conduct of the defendants warrants fines.
Wrongful use of medicine or material may not necessarily involve large monetary damages to the government, which paid for an inexpensive treatment but they could cause great harm.
A health care provider might misuse a prescription a few hundred times leading to serious health consequences, but without charging the government a lot of money to do so. Small parts may not cost much, but could endanger troops in the field.
Having the option of a fine to bring under these circumstances would be a way to make the public policy point, which is supposed to be at the heart of the False Claims Act, namely that doing business with the government requires a person to deal fairly.
That is why there are fines and multiples of damages in the Act. It is not merely to incentivize reporting, but also to emphasize that people should consider the public interest just a bit when working to take the government’s money.